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Sunday, March 25, 2012

Finally after five months of investigations comes the Jon Corzine MF Global bombshell Friday [Bloomberg: Corzine Ordered Funds Moved to JP Morgan].
The Bloomberg article references an e-mail written by Edith O’Brien,
the assistant Treasurer at MF Global and a memo written by
congressional staffers. A few aspects are of note: first that Corzine
“gave direct instructions” to transfer $200 million in segregated
consumer funds to JP Morgan for payment on an overdraft and used a lower
level functionary O’Brien to carry it out. Then in a clear violation
of fiduciary responsibility JP Morgan’s risk officer asked MF Global
for a letter stating these funds were not customer segregated accounts,
but then took the money anyway. The chief counsel for MF Global nixed
the letter JPM sent over as “too strong”.

O”Brien is to testify before Congress on Wednesday, but will plead
the Fifth. This suggests she has not been offered a deal, or immunity.

The captured regulatory agencies have not weighed in on this now
nearly five months after this historic crime. On the overall issue of
fraud and regulatory capture, view this Max Keiser and Mark Melin clip.
The Corzine ties into the labyrinth of the Obama Administration are dark
and deep. It is a virtual six degrees of Kevin Bacon sistema (the word
used for this form of government in Brazil) and in every sense of the
word a criminal enterprise. Here are various clipsof Obama and Biden heaping praise on Jon Corzine.

This is what Obama says about Jon Corzine. I can see why Obama likes him so much. They both have the same moral compass.

“Like many of us in public life today, Jon is a leader
who’s been called to govern in some extraordinary times. He’s
been tested by the worst recession in half a century — a recession that
was caused by years of recklessness and irresponsibility and a
do-nothing attitude. It was caused by the same small thinking that has
plagued our politics for decades — the kind of thinking that says we can
afford to just tinker around with our problems, we can put off the
tough decisions, defer the big challenges. We can just tell people what
they want to hear instead of what they need to hear. Well that’s not the
kind of leader that Jon Corzine is.”– Barack Obama, July 2009
-and “John Corzine is the smartest man in the room”….Joe Biden

It is hard for me to imagine that Obama can shuck and jive this one. Is he really going to revert to his shameful 60 minutes interview where
he makes excuses for criminal conduct on Wall Street and twists the
logic around to make himself look righteous. I have to think he may just
turn the dogs loose on Corzine, but where does that lead? Corzine was
more than a fund bundler, crony, and influence peddler. He was
instrumental in stacking the Obama administration with his associates.
What happens with CFTC apparatchik and former Corzine employee at
Goldman Sachs, Gary Gensler for example? CFTC was charged with
regulating MF Global. What about Eric “Empty Suit” Holder, Obama’s
attorney general, who never met a Wall Street crime he didn’t like? And
what about JP Morgan’s role in this? This should and might be the
biggest story since Watergate. My favorite from the wag comment
gallery: “Can we possibly take down Corzine, JP Morgan, and Obama all in one fell swoop? No way my life gets that good!!! No way.”

This will also be the supreme test of the two-tiered Justice system in this country. I am certain that Corzine will claim:

1. There was only an alleged call, no email from Corzine?
2. No form returned to JPMorgan?
3. Did JPM allow the transfer illegally?
4. And “Segregated accounts can include customer money and excess
company funds.” So if he did want the money transfered did someone mess
up and not transfer just company funds?
Still:
1) Ignorance of the law is not a valid defense.
2) The violation of fiduciary duty alone constitutes grand theft and criminal negligence.

For additional analysis on this topic and related trades, subscribers go to Russ Winter’s Actionable. The subscription fee is $69 per quarter and helps support Russ’s work on your behalf. Click here for more information or to subscribe.